Strategic plans are those that apply to an entire organization and encompass the organization’s overall goals. Tactical plans (sometimes referred to as operational plans) specify the details of how the overall goals are to be achieved. When McDonald’s invested in the Redbox kiosk business, it was the result of strategic planning. Deciding when, where, and how to actually operate the business was the result of tactical plans in marketing, logistics, finance, and so forth.

The number of years used to define short-term and long-term plans has declined considerably due to environmental uncertainty. Long term used to mean anything over seven years. Try to imagine what you’re likely to be doing in seven years. It seems pretty distant, doesn’t it? Now, you can begin to understand how difficult it is for managers to plan that far in the future. Thus, long-term plans are now defined as plans with a time frame beyond three years. Short-term plans cover one year or less.

Intuitively, it would seem that specific plans would be preferable to directional, or loosely guided, plans. Specific plans are plans that are clearly defined and leave no room for interpretation. For example, a manager who wants to increase his work unit’s output by 8 percent over the next 12 months might establish specific procedures, budget allocations, and work schedules to reach that goal. However, when uncertainty is high and managers must be flexible in order to respond to unexpected changes, they’d likely use directional plans, flexible plans that set general guidelines. For example, Sylvia Rhone, president of Motown Records, had a simple goal—to “sign great artists.”39 She could create a specific plan to produce and market 10 albums from new artists this year. Or she might formulate a directional plan to use a network of people around the world to alert her to new and promising talent so she can increase the number of artists she has under contract. Sylvia, and any manager who engages in planning, must keep in mind that you have to weigh the flexibility of directional plans against the clarity you can get from specific plans.

Some plans that managers develop are ongoing, while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. For instance, when Dell began developing a pocket-sized device for getting on the Internet, managers used a single-use plan to guide their decisions. In contrast, standing plans are ongoing plans that provide guidance for activities performed repeatedly. For example, when you register for classes for the upcoming semester, you’re using a standardized registration plan at your college or university. The dates change, but the process works the same way semester after semester.

Three contingency factors affect the choice of plans: (1) organizational level, (2) degree of environmental uncertainty, and (3) length of future commitments.40

Exhibit 5–8 shows the relationship between a manager’s level in the organization and the type of planning done. For the most part, lower-level managers do operational (or tactical) planning while upper-level managers do strategic planning.

Exhibit 5–8

Planning and Organizational Level

The second contingency factor is environmental uncertainty. When uncertainty is high, plans should be specific, but flexible. Managers must be prepared to change or amend plans as they’re implemented. For example, at Continental Airlines (now part of United Airlines), the former CEO and his management team established a specific goal of focusing on what customers wanted most—on-time flights—to help the company become more competitive in the highly uncertain airline industry. Because of that uncertainty, the management team identified a “destination, but not a flight plan,” and changed plans as necessary to achieve its goal of on-time service.

The last contingency factor also is related to the time frame of plans. The commitment concept says that plans should extend far enough to meet those commitments made when the plans were developed. Planning for too long or too short a time period is inefficient and ineffective. We can see the importance of the commitment concept, for example, with the plans that organizations make to increase their computing capabilities. At the data centers where companies’ computers are housed, many have found their “power-hungry computers” generate so much heat that their electric bills have skyrocketed because of the increased need for air conditioning.41 How does this illustrate the commitment concept? As organizations expand their computing technology, they’re “committed” to whatever future expenses are generated by that plan. They have to live with the plan and its consequences.

Federal, state, and local government officials are working together on a plan to boost populations of wild salmon in the northwestern United States. Managers in the Global Fleet Graphics division of the 3M Company are developing detailed plans to satisfy increasingly demanding customers and to battle more aggressive competitors. Emilio Azcárraga Jean, chairman, president, and CEO of Grupo Televisa, gets input from many different people before setting company goals and then turns over the planning for achieving the goals to various executives. In each of these situations, planning is done a little differently. How an organization plans can best be understood by looking at who does the planning.

In the traditional approach, planning is done entirely by top-level managers who often are assisted by a formal planning department, a group of planning specialists whose sole responsibility is to help write the various organizational plans. Under this approach, plans developed by top-level managers flow down through other organizational levels, much like the traditional approach to goal setting. As they flow down through the organization, the plans are tailored to the particular needs of each level. Although this approach makes managerial planning thorough, systematic, and coordinated, all too often the focus is on developing “the plan,” a thick binder (or binders) full of meaningless information that’s stuck away on a shelf and never used by anyone for guiding or coordinating work efforts.

A common complaint was that “plans are documents that you prepare for the corporate planning staff and later forget.”44 Although this traditional top-down approach to planning is used by many organizations, it’s effective only if managers understand the importance of creating documents that organizational members actually use, not documents that look impressive but are never used.

Another approach to planning is to involve more organizational members in the process. In this approach, plans aren’t handed down from one level to the next, but instead are developed by organizational members at the various levels and in the various work units to meet their specific needs. For instance, at Dell, employees from production, supply management, and channel management meet weekly to make plans based on current product demand and supply. In addition, work teams set their own daily schedules and track their progress against those schedules. If a team falls behind, team members develop “recovery” plans to try to get back on schedule.45 When organizational members are more actively involved in planning, they see that the plans are more than just something written down on paper. They can actually see that the plans are used in directing and coordinating work.